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Acquisitions

12 Months Ended

Dec. 31, 2024

Acquisitions

4. Acquisitions

Ironshore Acquisition

On September 3, 2024, the Company closed the Ironshore Acquisition. Ironshore had developed and obtained commercial approval to market Jornay in the United States. The Ironshore Acquisition was completed to expand the Company’s business beyond pain management and establish a commercial presence in neuropsychiatry via the attention deficit hyperactivity disorder (“ADHD”) market. The Company obtained control through the acquisition of shares in an all-cash transaction which closed on September 3, 2024 (“the Acquisition Date”).

The acquisition consideration includes payments for the Ironshore equity and assumption of certain of its debt. The Company deposited $25,000 into escrow at closing, to be released (i) in part, after, and subject to, determination of any adjustments related to finalization of working capital and cash at closing; and (ii) in part, and subject to, the lapse of certain indemnification obligations 12 months from the Acquisition Date. As of the Acquisition Date, and December 31, 2024, approximately $21,956 was due to the former Ironshore equity holders and $25,000 is recorded as restricted cash. In addition, the Company will pay approximately $7,000 to former Ironshore equity holders as the Company recovers certain acquired deposits as specified in the Merger Agreement, which amount is due no later than 225 days from the Acquisition Date. The Company also agreed to pay a $25,000 contingent payment upon the achievement of a financial milestone based on net revenues of Jornay for the year ended December 31, 2025.

The fair value of the total consideration was approximately $309,940 consisting of the following (in thousands):


Fair Value of Purchase Price Consideration	Amount
Fair value of purchase price consideration paid at closing:
Initial cash consideration	$	276,888
Deferred payments and contingent consideration:
Cash held in escrow related to indemnification and other settlements		21,956
Other deferred consideration		7,000
Fair value of contingent consideration		4,096
Total purchase consideration	$	309,940

The Company has accounted for the Ironshore Acquisition as a business combination and, accordingly, has included the assets acquired, liabilities assumed and results of operations in its financial statements following the Acquisition Date.

The preliminary purchase price allocation is based on estimates, assumptions, valuations and other studies which have not yet been finalized. The Company is finalizing its valuation of intangible assets, tangible assets, liabilities and tax analyses, and anticipates finalizing the valuation of assets acquired and liabilities assumed as the information necessary to complete the analysis is obtained, but no later than one year after the Acquisition Date. In the fourth quarter of 2024, the Company recognized measurement period adjustments to increase accrued returns by $31,298, deferred tax assets by $15,368, goodwill by $16,374 and certain other accounts by $444.

The following tables set forth the final allocation of the Ironshore Acquisition purchase price to the estimated fair value of the net assets acquired at the Acquisition Date:


		Amounts Recognized at the Acquisition Date
Assets Acquired
Cash and cash equivalents		$	9,350
Accounts receivable			44,601
Inventory			17,155
Prepaid expenses and other current assets			8,671
Property, plant and equipment, net			541
Intangible assets			635,000
Right-of-use assets			800
Deferred tax assets			44,960
Total assets		$	761,078
Liabilities Assumed
Accounts payable		$	6,656
Accrued liabilities			73,880
Accrued rebates, returns and discounts			110,924
Borrowings			8,954
Lease liabilities			800
Senior secured notes payable			151,500
Deferred royalty obligation			116,900
Deferred revenue			10,000
Total liabilities		$	479,614
Total identifiable net assets acquired			281,464
Goodwill			28,476
Total consideration transferred		$	309,940

The valuation of the acquired intangible assets and assumed deferred royalty obligations relies on significant unobservable inputs. The Company used an income approach to value the $635,000 for the acquired intangible asset. The valuation of the intangible asset was based on estimated projections of expected cash flows to be generated by the asset, discounted to the present value at an appropriate discount rate. The Company is amortizing the identifiable intangible asset on a straight-line basis over its useful life of 7.7 years (refer to Note 11, Goodwill and Intangible Assets). The acquired inventory was recorded at fair value, which includes an adjustment to record inventory from its historic cost to fair value of $10,700. The assumed senior secured notes payable and borrowings were settled immediately after the close of the acquisition, resulting in a loss in debt extinguishment of $4,145.

The excess of the purchase price over the fair value of identifiable net assets acquired represents goodwill. This goodwill is primarily attributable to synergies of merging operations. The acquired goodwill is not deductible for tax purposes.

Total revenues attributable to Ironshore from the Acquisition Date through December 31, 2024 were $37,239. However, earnings attributable to Ironshore from the Acquisition Date through December 31, 2024 are not distinguishable due to the rapid integration of Ironshore’s core operations into the Company.

Unaudited Pro Forma Summary of Operations

The following table shows the unaudited pro forma summary of operations for the twelve months ended December 31, 2024 and 2023, as if the Ironshore Acquisition had occurred on January 1, 2023. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of January 1, 2023, and is not indicative of what such results would be expected for any future period (in thousands):


	Years Ended December 31,
	2024			2023
Total revenues	$	694,874		$	645,353
Net loss	$	(15,798)		$	(104,139)

The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and Ironshore. The summary pro forma financial information primarily reflects the following pro forma adjustments:

●

Employee severance-related expense of $10,360 was reflected as of January 1, 2023;

●

The Company’s acquisition-related transaction costs of $9,046 were reflected as of January 1, 2023;

●

Additional amortization expense from the acquired intangibles;

●

Additional cost of product revenues related to the step-up basis in inventory to record inventory at fair value;

●

Adjustments to the Company’s interest expense related to additional borrowings on the 2024 Term Loan as defined in Note 14, Debt, and elimination of certain Ironshore debt.

In addition, all of the above adjustments were adjusted for the applicable tax impact.

Acquisition Related Expenses

During the year ended December 31, 2024, the Company incurred $24,329 of acquisition related expenses as a result of the Ironshore Acquisition and the substantial majority were included in Selling, general, and administrative expense in the consolidated statements of operations. These costs include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition; employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, Ironshore directors and officers insurance purchased at the closing of the Ironshore Acquisition, and miscellaneous other acquisition expenses incurred, including integration consulting costs and contract termination costs. The Company has accrued $510 related to employee severance costs incurred as of December 31, 2024 but not yet paid. Additional charges related to severance or retention payments are not expected to be material and the remaining employee termination costs are expected to be paid by March 31, 2025. The Company expects, however, to incur additional acquisition-related expenses relating to consulting fees, contract termination costs, and other integration-related expenses during the first half of 2025.


	Year Ended December 31, 2024
Employee-related expenses	$	10,360
Transaction costs		9,046
Ironshore directors and officers insurance		1,090
Other acquisition expenses		3,833
Total acquisition related expenses	$	24,329

BDSI Acquisition

On March 22, 2022 (the “BDSI Acquisition Date”), the Company acquired BioDelivery Sciences International, Inc. (“BDSI”) in an all-cash transaction. Upon closing, the Company acquired Belbuca and Symproic.

The BDSI Acquisition was completed to leverage the Company’s existing sales force and other operations to commercialize additional products that are typically marketed to similar physicians and to develop other synergies.

The total consideration paid for the BDSI acquisition was approximately $669,431 consisting of the following (in thousands, except per share amounts):


Fair Value of Purchase Price Consideration	Amount
Fair value of purchase price consideration paid at closing:
Cash consideration for all outstanding shares of BDSI's common and preferred stock (103,235,298 shares acquired at $5.60 per share)	$	578,118
Cash consideration paid to settle RSUs and in-the-money options		28,309
Cash paid to settle BDSI debt		63,004
Total purchase consideration	$	669,431

The Company has accounted for the BDSI Acquisition as a business combination and, accordingly, has included the assets acquired, liabilities assumed and results of operations in its financial statements following the BDSI Acquisition Date.

The final allocation of the consideration transferred to the assets acquired and liabilities assumed was completed in the year ended December 31, 2023.

The following tables set forth the final allocation of the BDSI Acquisition purchase price to the estimated fair value of the net assets acquired at the BDSI Acquisition Date:


		Amounts Recognized at the BDSI Acquisition Date
Assets Acquired
Cash and cash equivalents		$	97,362
Accounts receivable			55,495
Inventory			77,382
Prepaid expenses and other current assets			6,125
Property and equipment			1,242
Operating lease assets			481
Intangible assets			435,000
Total assets		$	673,087
Liabilities Assumed
Accounts payable		$	12
Accrued liabilities			18,249
Accrued rebates, returns and discounts			56,261
Operating lease liabilities			481
Deferred tax liabilities			62,510
Total liabilities		$	137,513
Total identifiable net assets acquired			535,574
Goodwill			133,857
Total consideration transferred		$	669,431

The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the $435,000 of intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with risk. The Company amortizes the identifiable intangible assets on a straight-line basis over their respective useful lives (refer to Note 11, Goodwill and Intangible Assets). In addition, the acquired inventory was recognized at its acquisition-date fair value, which resulted in an increase of $54,700 compared to its preacquisition book value.

The excess of the purchase price over the fair value of identifiable net assets acquired represents goodwill. This goodwill is primarily attributable to synergies of merging operations. The acquired goodwill is not deductible for tax purposes.

Total revenues attributable to BDSI from the BDSI Acquisition Date through December 31, 2022 were $140,653. However, earnings attributable to BDSI from the BDSI Acquisition Date through December 31, 2022 are not distinguishable due to the rapid integration of BDSI’s core operations into the Company.

Unaudited Pro Forma Summary of Operations

The following table shows the unaudited pro forma summary of operations for the years ended December 31, 2022, as if the BDSI Acquisition had occurred on January 1, 2021. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of January 1, 2021, and is not indicative of what such results would be expected for any future period:



	Year Ended December 31, 2022
Total revenues	$	493,284
Net income	$	8,674

The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and BDSI. The pro forma financial information primarily reflects the following pro forma adjustments:

●

Additional amortization expense from the acquired intangibles;

●

Additional cost of product revenues related to the step-up basis in inventory to record inventory at fair value; and

●

Adjustments to the Company’s interest expense related to repayment of the 2020 Term Loan and entering into the 2022 Term Loan as defined in Note 14, Debt.

In addition, all of the above adjustments were adjusted for the applicable tax impact.

Acquisition Related Expenses

During the year ended December 31, 2022, the Company incurred $31,297 of acquisition related expenses as a result of the BDSI Acquisition and the substantial majority were included in “Selling, general, and administrative” expenses in the consolidated statements of operations. These costs include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition, employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, BDSI directors and officers insurance, and miscellaneous other acquisition expenses incurred. The Company does not expect to incur any additional expenses related to the BDSI Acquisition.


	Year Ended December 31, 2022
Transaction costs	$	14,718
Employee-related expenses		8,008
BDSI directors and officers insurance		4,492
Other acquisition expenses		4,079
Total acquisition related expenses	$	31,297